VATNIEU5235 - Triangulation: how the simplification arrangements work
Introduction
The simplification arrangements are targeted at the intermediate supplier in some three party (triangular) supply chains. Where they apply, the intermediate supplier’s liability to account for VAT shifts to the final customer in the member state in which the goods are delivered. This relieves the intermediate supplier of the obligation to register for VAT in the member state concerned.
The arrangements are compulsory under Article 141 of the EU Principal VAT Directive (see VATNIEU5220) and so apply throughout the EU. They are implemented in UK law by paragraph 6 of schedule 9ZA
(1) Sub-paragraph (2) applies where:
(a) a person (“the original supplier”) makes a supply of goods to a person who belongs in a member state (“the intermediate supplier”),
(b) that supply involves the removal of the goods from a member state and their removal to Northern Ireland but does not involve the removal of the goods from Northern Ireland,
(c) both that supply and the removal of the goods to Northern Ireland are for the purposes of the making of a supply by the intermediate supplier to another person (“the customer”) who is registered under this Act,
(d) neither of those supplies involves the removal of the goods from a member state in which the intermediate supplier is taxable at the time of the removal without also involving the previous removal of the goods to that member state, and
(e) there would be a taxable acquisition by the customer if the supply to the customer involved the removal of goods from a memberstate to Northern Ireland.
(2) Where this sub-paragraph applies:
(a) the supply by the original supplier to the intermediate supplier is ignored for the purposes of this Act, and
(b) the supply by the intermediate supplier to the customer is treated for the purposes of this Act, other than for the purposes of Part 8 of this Schedule, as if it did involve the removal of the goods from a member state to Northern Ireland.
To be eligible both the intermediate supplier and the customer must be registered for VAT within the EU or have a UK(XI) identification. Businesses VAT registered in the UK, but which are not identified with an XI indicator cannot participate in triangulation. The simplification is also unavailable where the goods remain in the member state of origin or where two of the parties are already registered for VAT in either the country of dispatch or arrival (see VATNIEU5215).
Paragraph 6(9) of Schedule 9ZA provides for the conditions where the intermediary is a UK(XI) business:
(9) Where:
(a) any goods are acquired from a memberstate in a case which corresponds, in relation to another member state, to the case described in sub-paragraph (1) in relation to Northern Ireland, and
(b) the person who acquires the goods is registered under this Act, is identified for the purposes of VAT in Northern Ireland and would be the intermediate supplier in relation to that corresponding case,
the supply to that person of those goods and the supply by that person of those goods to the person who would be the customer in that corresponding case are to be ignored for the purposes of this Act.
UK intermediate supplier
Without the simplification a UK(XI) intermediate supplier would be registerable in either the member state of dispatch or arrival. However, under the simplification arrangements, the UK(XI) business can use its UK VAT registration number + XI identifier to secure zero rating from the supplier in the member state from which the goods are dispatched.
The intermediary supplier is subject to conditions made under regulations. Regulations are made under the powers in Paragraph 6(4) of Schedule 9ZA
(4) But neither sub-paragraph (2) …… applies in relation to a supply unless:
(a) in the case of sub-paragraph (2), the intermediate supplier
complies with such requirements to provide information to the Commissioners or to the person supplied as may be specified in
regulations made by the Commissioners.
(5) The requirements to provide information that may be specified in regulations include:
(a) requirements to provide documents (for example, invoices).
(b) requirements to provide information or documents before a supply is made (as well as after).
(c) requirements as to the content and form of information or documents to beprovided.
(d) requirements as to the manner in which information or documents are to be provided.
The regulations are
Regulation 17 VAT Regulations 1995
Paragraph 6(9) of Schedule 9ZA supplies to persons belonging in other memberstates
(1) Where a registered person makes a supply such as is mentioned in paragraph 6(9) of Schedule 9ZA to the Act he shall provide the person supplied with an invoice in respect of that supply.
(2) An invoice provided under this regulation shall comply withthe requirements of regulations 13 and 14.
Which sets out the requirements for the intermediary to issue a VAT invoice
Regulation 18 VAT Regulations 1995
Paragraph 6(2) of Schedule 9ZA supplies by intermediate suppliers
(1) On each occasion that an intermediate supplier makes or intends to make a supply to which he wishes paragraph 6(2) of Schedule 9ZA to the Act to apply he shall, subject to paragraph (3) below, provide the customer with an invoice.
(2) An invoice provided under this regulation by an intermediate supplier shall:
(a) comply with the provisions of the law corresponding, in relation to the memberstate which provided the intermediate supplier with the identification number for VAT purposes used or to be used by him for the purpose of the supply to him by the original supplier of the goods which were subsequently removed to the United Kingdom, to regulation 17,
(b) be provided no later than 15 days after the time that the supply of the goods would, but for paragraph 6(2) of Schedule 9ZA to the Act, have been treated as having taken place by or under section 6 of the Act,
(c) cover no less than the extent of the supply which would, but paragraph 6(2) of Schedule 9ZA to the Act, have been treated as having taken place by or under section 6 of the Act at the time that such an invoice is provided.
(3) Where an intermediate supplier makes a supply such as is mentioned in paragraph (1) above, and he has already provided the customer with an invoice that complies with the requirements of sub-paragraphs (a), (c) and (d) of paragraph (2) above, he shall not be required to provide the customer with a further invoice in relation to that supply.
(4) Where an intermediate supplier makes a supply such as is mentioned in paragraph (1) above and he provides the customer with an invoice such as is described in paragraphs (2) and (3) above, that invoice shall be treated as if it were an invoice for the purpose of regulation 83.
(5) Where an intermediate supplier makes a supply such as is mentioned in paragraph (1) above and he provides the customer with an invoice that complies only with the requirements of paragraph (2)(a) above, that invoice shall, for the purposes of this regulation only, be treated as if it were a VAT invoice.
The intermediary business must:
- issue an invoice to the customerin accordance withregulation 17 of the VAT Regulations 1995 that indicates adoption of the simplification arrangements as required by regulation 14(2)(h), and
- include the supply on an EC sales list (see VATNIEU7600) quoting the VAT number of the customer in the member state of destination of the goods and the figure ‘2’ in the indicator box.
Non-UK intermediate supplier
To use the arrangements in cases where a UK(XI) customer will account for VAT on arrival in Northern Ireland, the intermediate supplieris required to notify by writing to VAT written enquiries BT-VAT-Other, HM Revenue and Customs, BX9 1WR and provide
- their name, address and EU VAT registration number used, or to be used, to obtain zero-rating of the initial supply of the goods
- the name, addressand VAT registration number of the UK(XI) customer, and
- the date the goods were first delivered, or are intended to be delivered, to the customer under these arrangements.
Separate notifications are required for each customer and should reach the NETP no later than the date of issue of the first invoice (in accordance withthe requirements described below) to the customer concerned. Additional notifications are not requiredin the event of further supplies to the same customer. A copy of the notification should also be sent to the UK(XI) customer telling them that the simplified arrangements are being used. The supplier should retain a copy of each notification.
The supplieris also required toissue the customer with an invoicein accordance with Regulation 18 of the VAT Regulations 1995 on which adoption of the simplification arrangements is indicated. (This will be one of the requirements under the invoicing rules in their own member state to which regulation 18(2)(a) refers). The invoice must be issued within 15 days of the date on which the supply would otherwise have taken place under the normal UK tax point rules. These might include receipt of a payment, or delivery of the goods.
UK customer
A UK(NI) business whose supplier is using the simplified procedure for triangular supplies will receive a copy of the NETP notification mentioned above under ‘non-UK intermediate suppliers’.VAT is therefore to be accounted for as an acquisition in the normal way. The time of acquisition is the date of issue of the invoice by the supplier.